A money-starved government cannot "govern". The government is beholden to the money-issuers for "loans". Loans must be repaid with money, and debt is used as stick to control the activity of debtors. The banks' ability to lend more money is the carrot, debt is the stick, by which money issuers rule over money borrowers.
Creditors, not governments, exercise the governing power. Which we see today in the eurozone, with creditors making monetary and fiscal policy and imposing it on national governments like Greece.
It is true enough that the US government exercises legislative authority over money and banking. But more to the point is that in 1913 the government exercised that authority to cede money issuance to private commercial banks. In the eurozone the participating nations abandoned their own national currencies and adopted the euro that none of the nations is able to issue and control.
A supranational monetary authority rules over them all. Without getting all melodramatic, the euro as presently operated is like the ring in Tolkien's Lord of the Rings:
One Ring to rule them all, One Ring to find them, One Ring to bring them all and in the darkness bind them.
Fisher-Friedman's reform would reverse that legislation, by stripping the commercial banks of their money-issuing privilege, and restoring the money issuing power into government hands.
The commercial banks would be "in debt" to the government, for the government's loans to the banks of government-issued money. The government would not be in debt to the banks, for the banks' loans (bond purchases) of commercial bank-issued money.
But despite a century of advocacy by monetary reformers, the 1913 legislation has neither been revoked nor reformed.
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